Tuesday, November 06, 2007

Health Care Problems Exaggerated?

I’m a bit confused by Greg Mankiw’s latest blog post on the subject of health care. He seems to be arguing that, aside from redistribution issues and the perception of rising prices, the problem is relatively minor. (“...the magnitude of the problems we face are often exaggerated by those seeking more sweeping reforms...”) I suppose Greg regards the actuarial insolvency of the Medicare system as a problem of smaller magnitude than those alleged by reformers, or perhaps as a purely demographic problem that is only nominally related to the health care issue. But it seems to me, if the government has made a commitment to pay for certain things, the fact that the prices of those things are rising rapidly – regardless of whether quality is rising faster than prices – is a big problem.

I agree with Greg’s contention (in his New York Times piece) that it can be perfectly rational to spend a larger and larger fraction of our income on health care, but that doesn’t change the fact that, under current institutional arrangements, figuring out how to pay for it is a big, big problem. To put my point a little differently, those “pundits of the left” who pretend to be concerned about the health care system but really have a redistribution agenda, they would seem to be holding some pretty good cards right now, given that the government has already promised more free health care than it will be able to deliver under current fiscal arrangements.

When Greg asks the question, “What health reform would you favor if the reform were required to be distribution-neutral?” it is impossible to answer without making an assumption about how the distributions will be worked out under the current system. One possible assumption is that the Medicare problem will be solved by means testing. If so, one objection I have to the current system is that it will distort saving incentives by means-testing away the wealth that people have saved. That is an efficiency problem, not a distribution problem, but it’s hard to think how one might address that problem in a way that is both distribution-neutral and politically feasible. I believe (though Greg may disagree) that taxing rich workers is more efficient than taxing middle-class capitalists, but clearly that change is not distribution-neutral. I also believe (and Greg will probably agree) that taxing middle-class workers is more efficient than taxing middle-class capitalists, but…like that’s gonna happen.

I suspect that Greg is wrong about the motivation of radical health reform advocates. Redistribution, I would argue, is not the reason for health reform but the way to sell it. Somebody’s going to have to pay for Americans’ future health care, and if you say you’ll make the rich pay for it, the non-rich majority will be more willing to listen to the rest of your ideas.

I also suspect that Greg is wrong about why Americans are unhappy with the current system. I personally don’t mind rising prices, but I am unhappy with the current system. What makes me most unhappy (and has ever since I graduated college during a recession and had to apply for individual health insurance because I didn’t have a job yet) is the insecurity of it. Group health insurance (which most Americans get through their own or their spouse’s employer) is expensive but not prohibitively so. Individual health insurance is on average somewhat more expensive, but the problem is not the mean; the problem is the variance. If you don’t have access to group health insurance, there is no guarantee that you can be insured for any price.

There’s a distributional issue that’s important to me, too, but it’s not the rich vs. everyone else distribution that Greg talks about. And it isn’t the poor (in general) vs. everyone else either: the poor already have Medicaid. The category of people that I worry about are those who are poor, or who become poor, specifically because they (or people in their families) are sick. In some cases, it is probably their own fault for passing up health insurance when it was available. In other cases, I imagine, they never had a chance to become insured, or their insurance was cancelled.

No doubt the breadth of both of these problems – the problem of insecurity and the problem of people who are poor because of large health expenses – is exaggerated in my mind, but they make me very uncomfortable with the current system. And I don’t sense that the virtues of the current system (compared to those in other industrialized countries) are sufficient to justify the existence of these problems.

19 Comments:

Perhaps the real question is whether or not the government should be involved in the redistribution of health care dollars or not. Clearly, that should be the job of the insurance companies - and they aren't doing it properly. The shared risk concept of insurance equates to all the risk on the customer and none on the insurance company. Clearly there is an imbalance and those seeking private insurance are priced out or rejected.

When facing the future with no insurance or financial backing, health care problems can easily overwhelm any individual. Exaggerated? Perhaps the statistics skew in favor of those who are suffering under the current system. The suffering don't see it as exaggeration, rather it is grim reality.

Health care importance for health of population is exaggregated. Health care in this regard ranks only number 10, far after income, leve of education, health practices, etc. However, for some conditions health care is critical. Imagine having a broken limb and not being able to see an orthopedic surgeon...

I had a boss who commited suicide after bankruptcy due to cancer diagnosed while not insured.

I have a friend whose child died because said child (as a young adult) did not have health insurance, and recieved treatment too late for a very treatable condition (but one which required urgent treatment).

I'm middle class, not poor.

I think the argument that these people deserved to die because they were irresponsible is a demonstration of Republican callousness, and shows the cruel disregard that underlies their 'values' posturing.

The fact is, because of their cruel disregard, thousands of people die every year because they lack health insurance - AND we are the only country in the developed world to treat its people like trash to the point of death.

I have a friend whose child died because said child (as a young adult) did not have health insurance, and recieved treatment too late for a very treatable condition (but one which required urgent treatment).

And, people die in Great Britain for the 'very treatable conditions' too, and they have universal insurance coverage. Their newspapers are filled with stories about it.

Same with Canada. Being put on a waiting list just to be tested. If you are a sick Canadian, you'd better have the means to travel to the Mayo Clinic.

Interesting comments. My qualm with the current system is entry and exit of it. If I'm a private individual buying insurance, the insurance company can decide whether or not to insure me. If I own a company, they charge 2x the individual premium and don't care. The problem with being between insurances is there is no way to get credit for having it, even if it's just to keep you in the system. I almost wish you could buy health insurance insurance. Something like paying $10 to an insurer monthly and then after awhile they would agree to sell you insurance no questions asked or something like. That and a 5 year rolling deductible, gets a lot closer to covering everyone. Where I work, a lot of people work strictly for the insurance, nothing else. Of course health insurance really isn't insurance nowadays, it's just a discount buying club without the warehouse.

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